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Finance: Comparison Of Using Credit Cards And Other Kinds Of Debt (Essay Sample)
Comparison of Using Credit Cards and Other Kinds of Debt
Comparison of Using Credit Cards and Other Kinds of Debt Name Institution Date Comparison of Using Credit Cards and Other Kinds of Debt Whether you need to buy groceries, pay bills or even expand business; money is required, and in most cases, we don’t have that money lying around. It means we need to borrow from friends, family members or even banks. Some people fear and restrain from this kind of loans due to reasons such as overspending, higher interests, and other personal problems. Due to globalization and evolution of the business sector to a cashless society, there has been an introduction of credit cards. Credit cards are a form of short-term loans given to members depending on credit history and self-value in respect to their income and asset they possess. In my opinion, a person who is the use of credit card is worse than other loans due following reasons: Use of loans as a source of financing has much-hidden cost. These costs include interest rates, annual fees, and non-repayment fees. Some of these expenses go up to 20% per year. It means that there is not value for money as the cost incurred is much more. Unlike other loans such as mortgage, credit card interest rate is higher as there is no collateral associated with the loan and they are regarded as a high-risk loan. People who refrain from the loans can be able to save the money incurred, and loans hence will be better off than those who use credit cards (Agarwal, 2009). According to research done by Kara (2016), miscellaneous spending the first setback associated with credit card and other loan types as it encourages users to spend more than what they can afford or have at the moment. The credit card company does not require users to settle all their dues at the end of the month. Thus a user can add more debt or the existing debt. This seems like free money at the time when spending it and the more you wait, the more money they will need due to interest rates. If unable to pay the loans will lead to having bad credit history hence unable to access loans in the future. Most users of credit card users justify its use as a convenience and encourage a cashless society that is free from theft. However, those who refrain from loans also have the debit card issued by their banks, and they can transact without cash and even buy items they need on an online store. Use of debit card is better as one can plan and budget...
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